(1) This section sets out the deductions that are allowed in respect of a memorial if proceeds from the sale of the memorial are brought into account as a receipt in calculating the profits of the trade.
(2) A deduction is allowed for the costs incurred (by the trader or a predecessor) in producing the memorial.
(3) If the memorial includes an inscription, making that inscription is taken to be part of producing the memorial.
(4) If the memorial is attached to a building that is used wholly or mainly for the purpose of accommodating memorials or the memorial comprises an entire building, a further deduction is allowed for two-thirds of the associated building costs.
(5) In relation to a memorial attached to or comprising a building, “the associated building costs” means—
(a) the amount found by dividing the costs of the building by the total number of memorials that the building is capable of accommodating, or
(b) if the memorial comprises an entire building, the costs of that building.
(1) This section sets out the deductions that are allowed in respect of an inscription if proceeds from making the inscription are brought into account in calculating the profits of the trade.
(2) A deduction is allowed for the costs incurred (by the trader or a predecessor) in making the inscription.
(3) If the inscription is made on an existing framework designed to hold more than one inscription, a further deduction is allowed for two-thirds of the associated framework costs.
(4) In relation to an inscription made on an existing framework, “the associated framework costs”—
(a) is the amount found by dividing the costs of the framework by the total number of inscriptions that the framework is designed to hold, and
(b) includes, if the framework is attached to a building that is used wholly or mainly for the purpose of accommodating memorials, the amount found by dividing the costs of the building by the total number of memorials that the building is capable of accommodating.
(5) This section does not apply to an inscription if it is made as part of producing a memorial (see section 172ZC).
(1) For the purposes of sections 172ZB to 172ZD, the costs of a building are to be determined in accordance with this section.
(2) If the building was acquired for the purposes of the trade, the costs of the building are the lower of—
(a) the market value of the building when it was acquired, and
(b) the costs incurred in acquiring the building.
(3) If the building was constructed for the purposes of the trade, the costs of the building are the costs incurred in constructing the building.
(4) In either case—
(a) the acquisition cost (or market value) of the land on which the building is situated is to be ignored, and
(b) for these purposes, costs (or values) are to be apportioned between the land and the building on a just and reasonable basis.
(5) Any construction costs incurred with respect to the building after it was acquired or constructed for the purposes of the trade must be brought into account as costs of the building.
(6) But costs incurred in maintaining the building must not be brought into account.
(7) Costs must not be included as costs of the building if a deduction is or is to be brought into account for them under section 170(2) (deduction for capital expenditure).
(8) A reference in this section to costs incurred is to costs incurred either by the trader or a predecessor.
(9) In sections 172ZB to 172ZD and this section, “building” includes any other type of structure.
(1) In this Chapter “trading stock”, in relation to a trade, means anything (whether land or other property)—
(a) which is sold in the ordinary course of trade, or
(b) which would be so sold if it were mature or its manufacture, preparation or construction were complete.
(2) It does not include—
(a) materials used in the manufacture, preparation or construction of any such thing,
(b) any services performed in the ordinary course of the trade, or
(c) any article produced, or any material used, in the performance of any such services.
(1) This section applies if trading stock of a person's trade is appropriated by the person for any other purpose.
(2) In calculating the profits of the trade—
(a) the amount which the stock appropriated would have realised if sold in the open market at the time of the appropriation is brought into account as a receipt, and
(b) the value of anything in fact received for it is left out of account.
(3) The receipt is treated as arising on the date of the appropriation.
(1) This section applies if something that—
(a) belongs to a person carrying on a trade, but
(b) is not trading stock of the trade,
becomes trading stock of the trade.
(2) In calculating the profits of the trade—
(a) the cost of the stock is taken to be the amount which it would have realised if sold in the open market at the time it became trading stock of the trade, and
(b) the value of anything in fact given for it is left out of account.
(3) The cost is treated as being incurred on the date it became trading stock of the trade.
(1) This section applies if—
(a) trading stock of a trade is disposed of otherwise than in the course of a trade, and
(b) section 172B does not apply.
(2) In calculating the profits of the trade—
(a) the amount which the stock disposed of would have realised if sold in the open market at the time of the disposal is brought into account as the receipt, and
(b) any consideration obtained for it is left out of account.
(3) The receipt is treated as arising on the date of the disposal.
(4) This section is subject to section 172F.
(1) This section applies if—
(a) trading stock of a trade has been acquired otherwise than in the course of trade, and
(b) section 172C does not apply.
(2) In calculating the profits of the trade—
(a) the cost of the stock is taken to be the amount which it would have realised if sold in the open market at the time of the acquisition, and
(b) the value of anything in fact given for it is left out of account.
(3) The cost is treated as being incurred on the date of the acquisition.
(4) This section is subject to section 172F.
(1) Section 172D or 172E does not apply if the relevant consideration—
(a) falls to be adjusted for tax purposes under Part 4 of TIOPA 2010, or
(b) falls within that Part without falling to be so adjusted.
(1A) Subsection (1B) applies in relation to a disposal or acquisition if—
(a) by virtue of subsection (1), section 172D or 172E does not apply, and
(b) the market value amount is greater than the Part 4 TIOPA amount.
(1B) An amount equal to the market value amount less the Part 4 TIOPA amount is to be brought into account in calculating the profits of the trade (in addition to the Part 4 TIOPA amount).
(1C) In subsections (1A) and (1B)—
“market value amount” means the amount referred to in section 172D(2)(a) or 172E(2)(a);
“Part 4 TIOPA amount” means the amount which, following the application of Part 4 of TIOPA 2010 to the relevant consideration, is brought into account in respect of the relevant consideration in calculating the profits of the trade.
(2) For the purposes of subsection (1)(b), the relevant consideration falls within Part 4 of TIOPA 2010 without falling to be adjusted under that Part if—
(a) the condition in section 147(1)(a) of TIOPA 2010 is met, and
(aa) the participation condition is met (see subsection (2B)), but
(b) either—
(i) one of the conditions in section 147(1)(c) and (d) of TIOPA 2010 is not met, or
(ii) one of the exceptions mentioned in subsection (2A) applies.
(2A) The exceptions are those in—
(a) section 447(5) of CTA 2009 (exchange gains or losses from loan relationships),
(b) section 694(8) of CTA 2009 (exchange gains or losses from derivative contracts),
(c) section 213 of TIOPA 2010 (saving for provisions relating to capital allowances), and
(d) section 214 of TIOPA 2010 (saving for provisions relating to chargeable gains).
(2B) Section 148 of TIOPA 2010 (when the participation condition is met) applies for the purposes of subsection (2)(aa) as it applies for the purposes of section 147(1)(b) of TIOPA 2010.
(3) In this section “relevant consideration” means—
(a) in relation to section 172D, the consideration for the disposal of the stock, and
(b) in relation to section 172E, the consideration for the acquisition of the trading stock.
(1) If a person permanently ceases to carry on a trade, in calculating the profits of the trade—
(a) trading stock belonging to the trade at the time of the cessation must be valued, and
(b) the value must be determined in accordance with sections 175 to 178 (bases of valuation).
(2) But no valuation of the stock is required under this Chapter if section 147(3) or (5) of TIOPA 2010 (provision not at arm's length) has effect in relation to any provision which—
(a) is made or imposed in relation to the stock, and
(b) has effect in connection with the cessation.
(2A) Subsection (2B) applies if—
(a) by virtue of subsection (2), no valuation of the stock under this Chapter is required, and
(b) the market value of the stock is greater than the Part 4 TIOPA amount.
(2B) An amount equal to the market value of the stock less the Part 4 TIOPA amount is to be brought into account in calculating the profits of the trade (in addition to the Part 4 TIOPA amount).
(2C) In subsections (2A) and (2B)—
“market value”, in relation to stock, is the value the stock would have been determined to have if it had been valued in accordance with sections 175 to 178, and
“Part 4 TIOPA amount” is the amount which, following the application of Part 4 of TIOPA 2010 in relation to the provision referred to in subsection (2), is brought into account in respect of that provision in calculating the profits of the trade.
(3) If there is a change in the persons carrying on a trade, no valuation of the stock is required under this Chapter so long as a person carrying on the trade immediately before the change continues to carry it on after the change.
(4) If an individual carries on a trade alone, no valuation of the stock is required under this Chapter if the cessation is because of the individual's death.
(1) In this Chapter “trading stock” means—
(a) any property (whether land or other property) which is sold in the ordinary course of the trade or would be so sold if it were mature or its manufacture, preparation or construction were complete, or
(b) materials used in the manufacture, preparation or construction of any property mentioned in paragraph (a).
(2) In this Chapter “trading stock” includes also any services performed in the ordinary course of the trade—
(a) the performance of which is wholly or partly completed at the time of the cessation, and
(b) for which it would be reasonable to expect that a charge would be made if there were no cessation and, in the case of partly completed services, their performance were fully completed,
and any article produced, and any material used, in the performance of any such services.
(3) In this Chapter references to the sale or transfer of trading stock include the sale or transfer of any benefits and rights which accrue, or might reasonably be expected to accrue, from the performance of any such services.
(1) The value of trading stock belonging to the trade at the time of the cessation is determined as follows.
(2) If the stock is sold to a person who—
(a) carries on, or intends to carry on, a trade, profession or vocation in the United Kingdom, and
(b) is entitled to deduct the cost of the stock as an expense in calculating the profits of that trade , profession or vocation for income or corporation tax purposes,
the value is determined in accordance with section 176 (sale to unconnected person), 177 (sale to connected person) or 178 (election by connected persons).
(3) But if section 127 (preventing abuse of the herd basis rules) applies—
(a) the value is not determined in accordance with any of those sections, and
(b) the value is instead taken to be that given by section 127 (the price which the animals transferred would have fetched if sold in the open market at the time of the sale).
(4) In any other case, the value is taken to be the amount which the stock would have realised if sold in the open market at the time of the cessation.
176 Sale basis of valuation: sale to unconnected person
(1) The value of trading stock is determined in accordance with this section if—
(a) it is sold to a person who carries on, or intends to carry on, a trade, profession or vocation in the United Kingdom and is entitled to deduct the cost of the stock as an expense in calculating the profits of that trade, profession or vocation for income or corporation tax purposes, and
(b) the buyer is not connected with the seller.
(2) The value is taken to be the amount in fact realised on the sale.
(3) If the stock is sold together with other assets, so much of the amount realised on the sale as, on a just and reasonable apportionment, is properly attributable to each asset is treated as the amount realised on the sale of that asset.
177 Sale basis of valuation: sale to connected person
(1) The value of trading stock is determined in accordance with this section if—
(a) it is sold to a person who carries on, or intends to carry on, a trade, profession or vocation in the United Kingdom and is entitled to deduct the cost of the stock as an expense in calculating the profits of that trade, profession or vocation for income or corporation tax purposes,
(b) the buyer is connected with the seller, and
(c) no election is made under section 178 (election by connected persons).
(2) The value is taken to be the amount which would have been realised if the sale had been between independent persons dealing at arm's length.
178 Sale basis of valuation: election by connected persons
(1) The value of trading stock is determined in accordance with this section if—
(a) it is sold to a person who carries on, or intends to carry on, a trade, profession or vocation in the United Kingdom and is entitled to deduct the cost of the stock as an expense in calculating the profits of that trade, profession or vocation for income or corporation tax purposes,
(b) the buyer is connected with the seller, and
(c) an election is made under this section.
(2) The parties to the sale may make an election under this section if the value of the stock determined under section 177 exceeds both—
(a) its acquisition value, and
(b) the amount in fact realised on the sale.
(3) If an election is made, the value is taken to be—
(a) its acquisition value, or,
(b) if greater, the amount in fact realised on the sale.
(4) An election under this section must be made by both parties on or before the first anniversary of the normal self-assessment filing date for the tax year in which the cessation occurred.
(5) The “acquisition value” of trading stock means the amount which would have been deductible as representing its acquisition value, in calculating the profits of the trade, on the following assumptions—
(a) that the stock had been sold in the course of the trade, immediately before the cessation, for a price equal to the value of the stock determined under section 177, and
(b) that the period for which those profits were to be calculated began immediately before the sale.
(6) If the stock is sold together with other assets, so much of the amount realised on the sale as, on a just and reasonable apportionment, is properly attributable to each asset is treated as the amount realised on the sale of that asset.
For the purposes of sections 175 to 178 two persons are connected with each other if any of the following tests is met—
(a) they are connected with each other within the meaning of section 993 of ITA 2007 ,
(b) one of them is a firm and the other has a right to a share of the assets or income of the firm,
(c) one of them is a body corporate and the other has control over that body,
(d) both of them are firms and some other person has a right to a share of the assets or income of both of them, or
(e) both of them are bodies corporate, or one of them is a firm and the other is a body corporate, and in either case some other person has control over both of them.
180 Cost to buyer of stock valued on sale basis of valuation
(1) This section applies for the purpose of calculating the profits of the trade, profession or vocation carried on by the buyer of trading stock.
(2) If the value of the stock is determined in accordance with—
(a) section 175(3) or sections 176 to 178 (sale basis of valuation), or
(b) section 164(3) or sections 165 to 167 of CTA 2009 (corresponding corporation tax rules),
the cost of the stock to the buyer is taken to be the value as so determined.
(1) In sections 175 to 178 (except in section 178(5)) references to a sale include a transfer for valuable consideration.
(2) In relation to a transfer which is not a sale—
“amount realised on the sale” means the value of the consideration given for the transfer,
“buyer” means the person to whom the transfer is made, and
“seller” means the person who makes the transfer.
(1) If—
(a) a person permanently ceases to carry on a profession or vocation, and
(b) the work in progress is valued in calculating the profits of the profession or vocation,
the value must be determined in accordance with section 184 (basis of valuation of work in progress) or 185 (election for valuation at cost).
(2) If there is a change in the persons carrying on a profession, subsection (1) does not apply so long as a person carrying on the profession immediately before the change continues to carry it on after the change.
(3) If an individual carries on a profession alone or a vocation, subsection (1) does not apply if the cessation is because of the individual's death.
(1) In this Chapter “work in progress” means services performed in the ordinary course of the profession or vocation—
(a) the performance of which is wholly or partly completed at the time of the cessation, and
(b) for which it would be reasonable to expect that a charge would be made if there were no cessation and, in the case of partly completed services, their performance were fully completed,
and includes any article produced, and any material used, in the performance of any such services.
(2) In this Chapter references to the transfer of work in progress include the transfer of any benefits and rights which accrue, or might reasonably be expected to accrue, from the performance of any such services.
(1) If the work in progress is transferred for money or other valuable consideration to a person who—
(a) carries on, or intends to carry on, a trade, profession or vocation in the United Kingdom, and
(b) is entitled to deduct the cost of the work as an expense in calculating the profits of that trade, profession or vocation for income or corporation tax purposes,
the value of the work is taken to be the amount paid or other consideration given for the transfer.
(2) In any other case, the value of the work is taken to be the amount which would have been paid for a transfer of the work at the time of the cessation as between independent parties dealing at arm's length.
(3) These rules are subject to any election under section 185 (election for valuation at cost).
(1) The person who was carrying on the profession or vocation immediately before the cessation may elect that—
(a) the value of work in progress brought into account in calculating the profits of the period immediately before the cessation is to be the actual cost of the work, and
(b) the amount by which any sums received for the transfer of the work exceed the actual cost of the work is to be treated as a post-cessation receipt (see Chapter 18).
(2) An election under this section must be made on or before the first anniversary of the normal self-assessment filing date for the tax year in which the cessation occurred.
(1) This Chapter applies if—
(a) an amount received by, or owed to, a person carrying on a trade (“the trader”) is brought into account as a receipt in calculating the profits of the trade,
(b) the amount is paid or owed in a territory outside the United Kingdom, and
(c) some or all of the amount is unremittable.
(2) An amount received is unremittable if it cannot be transferred to the United Kingdom merely because of foreign exchange restrictions.
(3) An amount owed is unremittable if it cannot be paid in the United Kingdom and—
(a) it temporarily cannot be paid in the territory in which it is owed merely because of foreign exchange restrictions, or
(b) it can be paid in that territory but, if it were paid there, the amount paid would not be transferable to the United Kingdom merely because of foreign exchange restrictions.
(4) “Foreign exchange restrictions” are restrictions imposed by any of the following—
(a) the laws of the territory where the amount is paid or owed,
(b) executive action of its government, and
(c) the impossibility of obtaining there currency that could be transferred to the United Kingdom.
(1) If—
(a) the trader has profits from the trade in a period of account, and
(b) an unremittable amount has been brought into account as a receipt for that period,
a deduction of the amount is allowed from those profits (but see subsection (5)).
(2) If the trader has profits from the trade in a period of account and the total of—
(a) any unremittable amounts brought into account as receipts for that period, and
(b) any amount carried forward under this subsection or subsection (3) from the previous period of account,
exceeds the amount of those profits, the excess may be carried forward to the next period of account.
(3) If the trader does not have profits from the trade in a period of account and an unremittable amount has been brought into account as a receipt for that period, the total of—
(a) any unremittable amounts brought into account as receipts for that period, and
(b) any amount carried forward under this subsection or subsection (2) from the previous period of account,
may be carried forward to the next period of account.
(4) If an amount is carried forward under this section to a period of account in which the trader has profits from the trade, a deduction of the amount is allowed from those profits (but see subsection (5)).
(5) The total amount deducted under this section from the profits from a trade in a period of account must not exceed the amount of the profits.
(1) No deduction is allowed under section 189 in relation to an amount so far as—
(a) it is used to finance expenditure or investment outside the United Kingdom, or
(b) it is applied outside the United Kingdom in another way.
(2) No deduction is allowed under section 189 in relation to an amount owed so far as a deduction is allowed in respect of it under section 35 (bad and doubtful debts).
(3) No deduction is allowed under section 189 in relation to an amount owed so far as a payment under a contract of insurance has been received in relation to it.
(4) No deduction is allowed under section 189 in relation to an amount brought into account in calculating profits if relief under section 842 (unremittable income) may be claimed in relation to that amount.
(1) This section applies if—
(a) some or all of an unremittable amount has been deducted from profits under section 189, and
(b) any of the following events occurs.
(2) The events are that—
(a) the amount or part of it ceases to be unremittable,
(b) the amount or part of it is used to finance expenditure or investment outside the United Kingdom,
(c) the amount or part of it is applied outside the United Kingdom in another way,
(d) the amount or part of it is exchanged for, or discharged by, an amount that is not unremittable,
(e) a deduction is allowed in respect of the amount or part of it under section 35 (bad and doubtful debts), and
(f) if the amount is an amount owed, a payment under a contract of insurance is received in relation to the amount or part of it.
(3) The amount or the part of it in question is brought into account as a receipt in calculating the profits of the trade for the period of account in which the event occurs, but only so far as—
(a) it has been deducted from profits under section 189, and
(b) it has not already been brought into account as a receipt in calculating the profits of the trade as a result of this section.
(4) If the event is the receipt of a payment under a contract of insurance, the amount brought into account as a receipt must not exceed the amount of the payment.
(1) In this Chapter “know-how” means any industrial information or techniques likely to assist in—
(a) manufacturing or processing goods or materials,
(b) working a source of mineral deposits (including searching for, discovering or testing mineral deposits or obtaining access to them), or
(c) carrying out any agricultural, forestry or fishing operations.
(2) For this purpose—
“mineral deposits” includes any natural deposits capable of being lifted or extracted from the earth and for this purpose geothermal energy is treated as a natural deposit, and
“source of mineral deposits” includes a mine, an oil well and a source of geothermal energy.
(3) For the purposes of this Chapter any consideration received for giving, or wholly or partly fulfilling, an undertaking which—
(a) is given in connection with a disposal of know-how, and
(b) restricts, or is designed to restrict, any person's activities in any way,
is treated as consideration received for the disposal of the know-how.
(4) It does not matter whether or not the undertaking is legally enforceable.
(5) For the purposes of this Chapter references to a sale of know-how include an exchange of know-how and any provision of this Chapter referring to a sale has effect with the necessary modifications.
(6) Those modifications include, in particular, reading references to the proceeds of sale and to the price as including the consideration for the exchange.
193 Disposal of know-how if trade continues to be carried on
(1) This section applies if—
(a) a person carrying on a trade receives consideration for the disposal of know-how which has been used in the trade,
(b) the person continues to carry on the trade after the disposal, and
(c) neither section 194 (disposal of know-how as part of disposal of all or part of a trade) nor section 195 (seller controlled by buyer etc.) applies.
(2) The amount or value of the consideration is treated for all purposes as a trading receipt, except so far as it is brought into account under section 462 of CAA 2001 (disposal values).
(3) If the know-how is sold together with other property, the net proceeds of the sale of the know-how are treated as being so much of the net proceeds of the sale of all the property as, on a just and reasonable apportionment, is attributable to the know-how.
(4) For this purpose all property sold as a result of one bargain is treated as sold together even though—
(a) separate prices are, or purport to be, agreed for separate items of that property, or
(b) there are, or purport to be, separate sales of separate items of that property.
(5) Any question about the way in which a sum is to be apportioned under this section must be determined in accordance with section 563(2) to (6) of CAA 2001 (procedure for determining certain questions affecting two or more persons) if it materially affects two or more taxpayers.
(6) For this purpose a question materially affects two or more taxpayers if at the time when the question falls to be determined it appears that the determination is material to the liability to tax (for whatever period) of two or more persons.
194 Disposal of know-how as part of disposal of all or part of a trade
(1) This section applies if —
(a) a person carrying on a trade receives consideration for the disposal of know-how which has been used in the trade, and
(b) the know-how is disposed of as part of the disposal of all or part of the trade.
(2) If the person disposing of the know-how is within the charge to income tax, the consideration is treated for income tax purposes as a capital receipt for goodwill.
(3) If the person acquiring the know-how—
(a) is within the charge to income tax, and
(b) provided the consideration,
the consideration is treated for income tax purposes as a capital payment for goodwill.
(4) But the consideration is not treated for income tax purposes as a capital payment for goodwill if, before the acquisition, the trade was carried on wholly outside the United Kingdom.
(5) If the person disposing of the know-how is within the charge to income tax—
(a) that person, and
(b) the person acquiring the know-how (whether or not within the charge to income tax),
may jointly elect for this section not to apply (but see section 195).
(6) The election must be made within two years of the disposal.
(7) If—
(a) an election is made under section 178 of CTA 2009 (corresponding corporation tax provision), and
(b) the person making the acquisition mentioned in that section is within the charge to income tax,
the persons making the election under that section are treated as also making an election under this section (even though the person disposing of the know-how is not within the charge to income tax).
(1) This section applies if a disposal of know-how is by way of sale and—
(a) the seller is a body of persons over which the buyer has control,
(b) the buyer is a body of persons over which the seller has control, or
(c) both the seller and the buyer are bodies of persons and another person has control over both of them.
(2) In such a case—
(a) section 193 does not apply, and
(b) no election may be made under section 194.
(3) For the purposes of this section “body of persons” includes a firm.